The State’s Education Monopoly Increases Prices and Destroys Choice

by Ron Paul

Editor's Note: This selection is taken from Chapter 5 of Ron Paul's new book The School Revolution: A New Answer for Our Broken Education System.

The free-market principle of open entry is challenged by governmental restrictions on access to consumer markets. There are many official justifications for these restrictions, but the main one is this: “Customers do not know what is good for them.” They do not know what products to buy, what prices to pay, or what arrangements to negotiate with respect to return and replacement. Customers are in fact woefully ignorant of what they really need, so the state enters the marketplace to restrict what customers are legally allowed to purchase. The idea here is that state officials know what customers really need as distinguished from what customers are willing to pay for.


One of the justifications for this is that advertising deludes customers. This means that customers are considered not able to sort out fact from fiction when they read or see an advertisement. It is interesting that the same advertising agencies hired by businesses to sell products are also hired by politicians to produce advertisements in election years. In other words, advertising is accepted as a legitimate way to motivate people to take action during election years, but is placed under suspicion when it comes to advertising products and services. People in their capacity as voters are supposedly perfectly capable of making accurate decisions based on advertising. On the other hand, those same people in their capacity as customers supposedly are incapable of making accurate decisions based on advertising. This is utterly illogical, but it is basic to understanding all modern governments in the West ...
Whenever the state intervenes in a market to restrict entry by sellers, it results in higher prices. Customers are not able to buy the kinds of goods and services they want, at a price they are willing to pay. So the producers who would otherwise have entered the market are forced to enter other markets. These markets are less profitable than the restricted markets. Customers in the regulated markets are worse off, and so are marginal suppliers who leave those markets.
We can see this principle at work in the market for education. The supply of education is limited by government restrictions on academic certification. Teachers must go through a specified regimen at the college level in order to be eligible to teach in the nation’s tax-funded school systems. This reduces the supply of teachers who can legally be hired by local school districts. Furthermore, restrictions on school construction by private entrepreneurs limit the amount of competition tax-funded schools face.
So, parents are compelled to send their children to school, but the state restricts the number of schools available to parents. This creates a near monopoly of education, kindergarten through twelfth grade, for the state. The state uses tax funding to build schools, and it uses the regulatory system to restrict the creation of rival schools. This is the classic mark of a monopoly.
The free-market solution is open entry and competition. Competition may be in the form of quality. Some parents want very-high-quality education for their children, and are willing to pay a great deal of money to purchase it. They would not have to pay as much money if there were open entry into the local market for schools. Other parents cannot afford the best education for their children, because they do not have enough money. So, they want price-competitive education. This is also made available by entrepreneurs in the field of private education. These entrepreneurs can decide which programs are affordable for which parents, and which programs will meet the demands of specific parents. As more schools come onstream, the range of choice for parents increases. This is the standard definition of what constitutes economic growth. Economic growth takes place when customers can buy more goods and services than they were able to buy prior to the increase in economic growth ...
Bureaucrats in the field of education, which is almost exclusively nonprofit education, have a bias against price-competitive academic programs. They assume that these programs are of low quality. They think it is a good idea to close the market to sellers of any kinds of curriculum not certified by educational bureaucrats. They have greater control over the content and structure of education when they can restrict entry into the marketplace. In the name of helping children, these promoters of self-interested restrictions on entry conceal the fact that they are able to exercise greater power over education and then charge more for the privilege of doing so.

This is why libertarians believe that there should be open entry into the field of education. They do not trust state bureaucrats to act on behalf of parents, especially parents who have a particular view of the best methodology and content for the education of their children. The bureaucrats operate in their own self-interest, which is to expand their power and income.
This raises the issue of government regulation of schools. First, the government requires compulsory attendance. Second, in order to keep control over the content of the curriculum, governments establish rules and regulations governing those schools. Parents are not allowed to send their children to schools that do not meet these qualifications. The qualifications are set very high, so that not many schools can be established to compete against the public school system. This increases the power of the public school system, and the power of the bureaucrats who run the system.
An example of this kind of regulation can be seen in the requirement that private high schools have libraries of at least 1,500 books. States around America had this requirement or something similar to it in the 1990s. But a student in the early 1990s was able to carry a CD-ROM with 5,000 books on it: the Library of the Future. No matter. A CD-ROM and computer stations did not count as meeting the 1,500-book requirement. The books had to be physical, so tax money had to go toward that. Today students have access to hundreds of thousands of books by means of the cell phones in their pockets. But accredited high schools must still have physical libraries. These libraries must be run by someone with a degree in library science. Conclusion: The library requirement has nothing to do with the number of books in the library. It has everything to do with increasing the cost of building a facility that qualifies as a school that meets the government’s regulations.
The goal of academic regulation is to limit the supply of schools that compete against public schools. This is done in the name of guaranteeing the educational quality of the school, thereby protecting the students. Yet the academic performance of the public schools continues to decline, and has done so since the early 1960s. The scores on the SAT and ACT exams continue to fall. The high point was in the early 1960s. So, regulation has not been successful in guaranteeing the quality of education. But it has been quite successful in restricting entry into the field of education.
In the 1980s there was a great battle over homeschooling. States around the nation passed laws prohibiting parents from substituting homeschooling for schooling in either a tax-funded school or a private school. The private schools were so expensive that only a handful of parents could afford them. This meant that parents would simply have to send their children to the public schools. The appearance of homeschooling in the 1970s and ’80s represented a threat to this strategy of restricting the supply of competing educational programs. States prosecuted parents for teaching their children at home.
A major case was tried in Texas in 1985, Leeper v. Arlington, in which a coalition of homeschool advocates brought a class-action suit against the state. The state lost the case in the state supreme court in 1994. The court required school districts to compensate the parents of the children who brought the suit. This case sent a clear message to local school districts in Texas. Overnight, they removed most of the restrictions against homeschooling. The state of Texas became very friendly toward homeschooling. But it took a court case to achieve this goal ...
There should not be anything resembling a government monopoly of education. Standards that govern the public school system locally should not be imposed on parents who decide to remove their children from that system. Without freedom of parental choice in education, the state will pursue a policy of extending its monopoly over education. Tenured, state-funded bureaucrats will then use this monopoly to screen out ideas that call into question the legitimacy of government interference in many areas of life, including education. The government does not have to burn books in order to persuade the next generation of voters of ideas that favor the government. The government need only screen out books and materials that are hostile to the expansion of the state.